When private companies offer health insurance to their employees the insurance carrier they contract with requires...

When private companies offer health insurance to their employees the insurance carrier they contract with requires that all employees be obligated to participate and pay premiums whether they wish to or not. What problem is the health insurance company trying to avoid? How does this policy mitigate this problem?

Expert Solution

The insurance is trying to avoid a situation wherein only people who are vulnerable and.more likely to avail medical treatment opt for insurance and this increase the payout for the insurer significantly. By diversifying across individual, the chance of claim decreases and hence the insurer is able to offer insurance at a commercially viable rate.

This policy mitigate the problem by ensuring that all employees opt for insurance and this ensures that vulnerable as well as not so vulnerable section opts for the insurance and thus a necessary diversification happens.

jeff jeffy answered 2 years ago

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